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Size and distribution of incomes as determinants of social welfare
Institution:1. Multimodal Functional Imaging Lab, Biomedical Engineering Department, McGill University, Duff Medical Building, 3775 Rue University, Montreal, QC H3A 2B4, Canada;2. Neurology and Neurosurgery Department, Montreal Neurological Institute, McGill University, 3801 Rue University, Montreal, QC H3A 2B4, Canada;3. École de Technologie Supérieure, 1100 Rue Notre-Dame O, Montreal, QC H3C 1K3, Canada;4. Centre de Recherches Mathématiques, Université de Montréal, Pavillon André-Aisenstadt 2920 Chemin de la tour, Room 5357, Montreal, QC H3T 1J4, Canada;5. Physics Department and PERFORM Centre, Concordia University, 7200 Rue Sherbrooke St. W, Montreal, QC H4B 1R6, Canada;1. University of Oxford, Manor Road Building, Manor Road, Oxford OX1 3UQ, UK;2. International Monetary Fund, 700 19th Street NW, Washington DC 20431, USA
Abstract:The paper is concerned with the relationship between the inequality of income distributions and the social welfare they imply. Starting-point is an ordering of income distributions in terms of inequality. Based on explicit value judgments about the trade-off between size and distribution of incomes an ordering in terms of social welfare is derived. The welfare functions representing this ordering allow a size-distribution split up. It is shown that the procedure can be reversed. This ordinal approach is considerably more flexible and less arbitrary than most methods proposed in the literature.
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